stocks move into the twilight zone of complacency

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Newtown, PA. ValuEnginecovers over 7,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks

and commentary can be found at http://www.valuengine.com/nl/mainnl

January 7 , 2011 Stoc ks Move in to t he Tw i l igh t Zone o f Complacency

Everyone is bullish on stocks today, just like everyone was bearish in March 2009, when Iprojected a rally of 40% to 50%. I was wrong - the Dow is now 80.8% above the March 2009 low

with the NASDAQ up 114.1% from those lows. In March 2009 91% of all stocks were undervalued, today its less than 35% In March 2009 76% of all stocks were more than 20% undervalued, today its only 16.1%. In March 2009 all eleven sectors were extremely undervalued, today 15 of 16 sectors are

overvalued In March 2009 stocks were extremely oversold, today the weekly slow stochastic (MOJO) is 9.3

on a scale of 0.0 to 10.0, where a reading above 8.0 is overbought.

The major equity averages straddle quarterly value levels, pivots and risky levels favoring areversal-oriented first quarter 11,395 Dow, 1162.5 SPX, 2853 NASDAQ, 4671 Transports and765.50 Russell 2000. The key risky level is thus on the NASDAQ, so if the other major averages

start to cascade below their quarterly levels before the NASDAQ leads, the downside on theDow is my semiannual value level at 9,449. Two of my eleven predictions for 2011 have cometrue already in the first week of 2011.

Comex Gold has gone parabolic and therefore you cannot predict how high gold prices canclimb. Gold needs a weekly close above my semiannual risky level at $1452.6 to continue inflating theparabolic bubble, which become harder now that my prediction has been achieved. My prediction isthat there will be a test of my annual value level at $1356.5 if not lower in 2011. Gold is belowthe 50-day simple moving average at $1380.6 for the first since August 11th.

The euro versus the dollar formed a trading range in November trading range of 1.2972 to 1.4281. Myprediction is that the euro will have a weekly close below my quarterly pivot at 1.3227 resulting in a

trend below 1.2972. The euro traded below 1.2972 overnight and into this mornings trading.

10-Year Note (3.417) Weekly, annual and semiannual value levels are 3.714, 3.791 and 4.268 witha daily pivot at 3.424. Annual, semiannual and monthly risky levels are 2.690, 2.441, 2.322 and 2.150.My prediction is that yields will decline again with the 10-Year yield declining to my annual risky level a2.690. My annual value level is 3.791. Wall Street is bearish on US Treasuries. I disagree just likelast year and it appears that the 10-Year yield can fall to a test of its 200-day simple movingaverage at 3.057.


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Courtesy of Thomson / Reuters

Comex Gold ($1371.9) Annual, semiannual and annual value levels are $1356.5, $1300.6 and$1187.2. My weekly pivot is at $1380.0. Daily, monthly, quarterly and semiannual risky levels are$1406.1, $1439.0, $1441.7 and $1452.6.


Nymex Crude Oil ($88.32) Semiannual and monthly value levels are $87.52 and $75.74 withweekly and daily pivots at $88.50 and $89.44. Weekly closes above $87.52 targets annual,semiannual and quarterly risky levels at $99.91, $101.92, $107.14 and $110.87.


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The Euro (1.3012) Monthly and weekly value levels are 1.2805 and 1.2703 with quarterly and dailypivots at 1.3227 and 1.3244, and semiannual and annual risky levels at 1.4624, 1.4989, 1.6367 and1.7312. The euro is below its 200-day simple moving average at 1.3079.


Daily Dow: (11,697)Annual, quarterly, weekly, semiannual, monthly and semiannual value levels are11,491, 11,395, 11,334, 10,959, 10,427 and 9,449 with a daily risky level at 11,732, and annual riskylevel at 13,890.


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Thats todays Four in Four. Have a great day.

Richard SuttmeierChief Market StrategistValuEngine.com, (800) 381-5576

Send your comments and questions to [email protected]. For more information on our products and services visitwww.ValuEngine.com

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, andquarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. Mynewest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. You can go HERE to review sample issues andfind out more about my research.

I Hold No Positions in the Stocks I Cover.

stocks move into the twilight zone of complacency

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